Good Timing: CEO Stock Option Awards and Company News Announcements

ABSTRACT

This article analyzes the timing of CEO stock option awards, as a method of investigating corporate managers' influence over
the terms of their own compensation. In a sample of 620 stock option awards to CEOs of Fortune 500 companies between 1992
and 1994, I find that the timing of awards coincides with favorable movements in company stock prices. Patterns of companies'
quarterly earnings announcements are consistent with an interpretation that CEOs receive stock option awards shortly before
favorable corporate news. I evaluate and reject several alternative explanations of the results, including insider trading
and the manipulation of news announcement dates.